Thursday, May 07, 2009
Selling risky instruments to unwitting investors around the world.
BusinessWeek: The Perils of Global Banking
Investors are trying to recoup money from Lehman Brothers, whose bankruptcy in September paralyzed the world economy.
Tens of thousands of burned investors around the world are complaining loudly that they were sold toxic bonds that were supposed to be safe. In street demonstrations from Hong Kong to Hamburg, protesters are demanding that their governments do something to get their money back.
Now there's a growing fear among economists, policymakers, and business groups that in the name of protecting their citizens from global financial institutions, governments could slow the flow of capital between countries.
Posted by devo @ 06:59 AM (290 views) Add Comment
2 Comments
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1. icarus said...
What's wrong with slowing the flow of capital between countries? Much of globalisation is the financialisation and de-democratisation of much of the world and the self-expansion of Anglo-American finance capital, rather than productive investment and efficiency. It's possible to slow the international shenanigans of Wall St. investment banks and still provide services such as raising capital for real-economy companies, insuring imports and exports, hedging against currency fluctuations etc.
'Market intgration is the bedrock of our prosperity' says an expert. These are the people who say we should fix the banks to repair the credit scene. For what? Consumers aren't cutting back on spending because they can't get credit, they're cutting back because their bubblewealth has gone. For more housing, retail and office construction? I don't think so. For investment in equipment and software? Well the big, healthy companies can get long- and short-term money at low rates anyway. That leaves equipment/software investment by smaller companies, whose difficulties stem from the fact that they look risky in a recession. This kind of investment is only about 7% of US GDP, anyway, so small / medium company investment is maybe 3% of GDP. Fixing the banks could increase this by 50% - that's a total of 1.5% of GDP. Fixing the banks for this is the ultimate elephantine labour to give birth to a mouse. In any case, the bailout money didn't get to the small regional banks that make these kinds of loans.........
2. 51ck-6-51x said...
icarus - I concur.
Regarding the article itself, whatever happened to investors doing their own research?
- "Lehman's Amsterdam notes were bafflingly complex."
It may (will) sound harsh, but if you class yourself as an investor but just do what some advisor or agency tells you, then you are a schmuck and deserve to lose. If you were knowingly taking a punt on an unknown, then you shouldn't be complaining now (well, maybe to yourself). A guarantee made by the issuer is no guarantee whatsoever.
aside: If one is mentally ill one doesn't generally manage ones own finances, unfortunately some do (prob more so in developing countries), and that is unfortunate. Our society really needs to address many issues in respect of mental health, it's very sad.